Have you been dreaming of starting your own gym but don’t know where to begin? Starting a gym may sound as simple as buying some equipment and opening your doors, but a combination of business knowledge, industry insights, and careful planning is needed.
Whether you’re an aspiring entrepreneur or a fitness enthusiast looking to turn your passion into a business, our guide will help you navigate the process and set you on the path towards establishing a successful gym.
Business Overview
At its most basic level, a gym is a facility that offers fitness equipment and space for exercise and physical activity. Gym owners generate revenue through membership fees, personal training services, and other amenities. The services provided by gyms can range from open workout spaces with basic cardio and strength equipment to fully comprehensive fitness facilities offering a wide array of classes, programs, pools, courts, etc.
Many people use gyms because of their ability to access equipment they can’t afford to purchase or have the space for in their homes. Gyms also offer a social factor that can make working out less isolating. Gyms frequently offer specialized classes and events to keep members motivated and to draw in new members. With other perks designed to reduce excuses for not working out, like childcare and personal trainers’ availability, it’s easy to see why gyms have become so popular.
Industry Summary
The fitness industry is a significant part of modern-day society. With millions of people actively participating in gym workouts, yoga classes, and other fitness programs, the industry has shown tremendous growth in recent years. Over the past decade, the number of fitness-related businesses in the country has been steadily increasing. In 2022, nearly 113,000 such businesses generated a combined $32 billion., according to IBISWorld research.
Many gyms are independently owned, but there are franchises and large companies, a few of which include Planet Fitness, 24 Hour Fitness, Gold’s Gym, and LA Fitness.
In terms of sports and outdoor activities, approximately 20.1 percent of men and women in the U.S., which was a slight decrease compared to the previous year. Various factors influence Americans’ participation in sports, including socioeconomic status, age, disability, personal interests, and societal expectations. According to a 2023 survey on the most popular sports activity, fitness, aerobics, and cardio were ranked as the most popular sports activity in the U.S.,
The fitness center industry is poised for continued growth in the coming years. Factors that will drive this growth include increased emphasis on health and wellness, the entry of new players into the market, and the adoption of new technologies like wearable fitness devices. Additionally, the industry is likely to witness more niche fitness options like virtual workout programs, wellness retreats, and fitness apps. This diversification will enable fitness centers to offer more personalized experiences to their clients.
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Steps To Start A Gym
Step 1: Market Research
One of the first steps in establishing a successful business is to assess and understand the market demand for your potential services. But how does one go about doing so, and what factors should you consider when looking to evaluate the market potential for your gym?
One initial task is to study your local area’s demographics. Looking at information from the Census Bureau, like age groups, income levels, and lifestyle preferences, can give you insight into whether or not there is a demand for fitness services and allow you to identify target customer segments. For example, if there’s a higher concentration of young professionals in the area, you might focus on offering convenient and time-efficient workouts. Or if seniors make up a significant percentage of the demographic, programs tailored towards seniors or injury recovery may prove to be a valuable and profitable niche program. Apart from identifying who to target, demographic research can also help you pick a location since you can base your decision on where your target market lives or works.
Analyzing the competition is another factor in determining market demand for your gym. Researching existing gyms and fitness facilities in your area can help you identify their strengths, weaknesses, target demographics, and the services they offer. You can research the competition by visiting the gym in person and reading comments on social media to see what people say about specific gyms. It’s notable to keep in mind that your competition also extends to gyms at offices, apartments, and those run by cities or charities.
Once you’ve analyzed the competition, it’s time to identify your unique selling proposition (USP). Your USP is what sets you apart from the competition and gives potential customers a reason to choose your gym over others. This can be anything from your location, your services, and your pricing strategy. Think about what your gym offers that the others don’t to give your gym a competitive advantage.
Step 2: Write a Business Plan
After conducting research and finding out that there’s room for your gym in the market, the next step is to start writing your gym’s business plan. You may have heard this advice before and aren’t sure why you need one. Let’s explain a few of the reasons.
First, your business plan will outline your gym’s objectives, goals, and the strategies you’ll use to reach them. Your plan should include the location you’ll choose, the kind of equipment you’ll purchase, and your target market. Having a plan that outlines the specific objectives you hope to achieve will increase the chances of success for your gym, as potential issues can be identified before they happen.
Second, a business plan helps estimate the feasibility of your gym. This includes projecting revenue streams, such as membership fees or personal training, in addition to operating expenses, such as rent, utilities, staff salaries, and equipment maintenance. By analyzing these factors, you can determine the break-even point and forecast the business’s profitability. It’s also important to consider seasonality, as membership growth often peaks after the winter holidays, leading to fluctuations in revenue throughout the year. Your business plan should include strategies to address these seasonal variations and maintain financial stability all year.
Last, a gym business plan is typically required if you are seeking funding. A business plan includes an overview of the concept, the background of the owners, and financial projections, which lenders use to evaluate the viability of the gym.
Related: How to write a business plan
Step 3: Source Funding
Starting a gym requires a considerable investment, and securing funding is a common hurdle for gym owners, but with careful planning, you can obtain the necessary funding to establish and grow your gym. The most common options include:
Personal savings: The first source of funding to consider is personal savings. Assess your financial situation and determine how much you’re willing and able to invest in your gym. If this initial investment is not enough, you’ll need to explore outside funding sources.
Business loans: If you need additional funding beyond your personal savings, business loans are a common way to finance a gym. You can obtain loans from traditional banks or credit unions, and to qualify, your lender will likely require a business plan, collateral, and a solid credit score. In some cases, the bank may feel the loan is too risky, in which case they may require a Small Business Administration (SBA) loan guarantee to reduce their risk.
Equipment financing: You can also look to equipment manufacturers for loan and lease options when purchasing gym equipment. Approval is typically less stringent than a bank, though the interest cost is often higher.
Friends and family: Family and friends are another potential financing source. Put agreements in writing to help avoid relationship strains resulting from financial disagreements.
Microloans: If you need small funding amounts or are not eligible for business loans through traditional banks, microloans are another option to explore. Some financial institutions that offer microloans will also provide business training and other resources to support your business’ growth.
Related: Finding the money to start a business
Step 4: Register the Business
When starting a gym, there are various legal requirements and registrations to be aware of. These include:
Business structure: There are four common types of business structures: sole proprietorship, general partnership, corporation, and Limited Liability Company (LLC). Each type of business structure has its own advantages and disadvantages.
- Sole proprietorship: This is the simplest form of business structure, with easy startup and the lowest cost being its primary advantages. The downside is that the owner is solely responsible for the actions of the business and its liabilities.
- General partnership: This involves two or more people sharing ownership of the business. Each partner contributes to all aspects of the business and shares in the profits and losses.
- Corporation: A corporation is a legal entity separate from its owners, providing the strongest protection against personal liability. However, it is more complex and costly to set up and run.
- Limited Liability Company (LLC): An LLC combines the liability protection of a corporation with the simplicity of a partnership or sole proprietorship.
Related: Comparison of business structures
Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.
Some popular LLC formation services include:
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Business name registration: After registering the business structure, you may need to register your business name. This process will vary depending on what business structure you pick. Sole proprietors and partnerships will often be required to register a “Doing Business As” (DBA), while corporations and LLCs register with the state during the formation process.
Related: Tips and ideas for naming a gym
During this time, it’s also a good idea to check if the name you want is available as a web domain, even if you’re not ready to set up a website yet.
Related: Finding a domain name for your business
Zoning regulations: Before deciding on a location for your gym, you need to check the local zoning laws to see if commercial gym use is permitted in that area. If a zoning variance is needed, you will need to file for it.
Obtain business licenses and permits: To operate a gym, you need to obtain business licenses and permits. The requirements for licensing and permits may vary depending on the state and local regulations. Some common licenses and permits required to operate a gym include a health department permit, a business license, and a seller’s permit.
Related: What licenses do gyms need?
Membership contracts: State requirements for gym member contracts vary, but most commonly, there are specific requirements for what can be included in a membership contract. There are additional state requirements if your gym offers personal trainers to be aware of as well.
Step 5: Acquire & Set Up the Gym
Setting up operations for a gym is a hands-on step in bringing your fitness center to life.
The first thing to consider when setting up your gym is the property. Your space can be a significant expense because of the size of the space needed; a large commercial gym will require between 3,000 and 4,000 square feet of space. Boutique studios like Crossfit, high-intensity training, etc., may allow for a smaller footprint and lower cost in rent. A property in a popular retail location can help increase gym attendance and memberships since many people seek the convenience of going to the gym on the way home from work or running errands. These high-traffic areas can cost more to lease, but that additional expense may pay off in increased exposure. Verify the location has all necessary utilities and infrastructure, including electricity, water, heating, and cooling systems. If not, get quotes for any renovations or upgrades before choosing a property.
Next, plan the layout and design of your gym space. Consider the placement of workout areas, weightlifting zones, cardio machines, and any additional amenities like a reception area, locker rooms, or showers.
Once you have all of the necessary gym equipment and amenities sorted, it’s time to set up your operational systems. Invest in member management software, inventory tracking, and financial management tools to make running your gym more efficient. Member management software will help you track memberships, send out billing statements and updates, and keep attendance records.
Step 6: Hire Staff
When starting a gym, you will likely hire employees to ensure operations run smoothly. Hiring employees comes with certain responsibilities that you must be aware of. As a new employer, it’s important to follow legal requirements before hiring any employees.
First, you need to obtain an EIN (Employee Identification Number) from the IRS for tax purposes. Secondly, you must ensure that all potential hires are legally eligible to work in the United States. It’s important to verify employment eligibility through Form I-9.
In addition, every state has different hiring requirements that must be met, such as background checks or specific forms that need to be filed. It’s important to research what is required in your state.
Most states also require worker’s compensation insurance, which protects your employees in case of work-related injuries or illnesses. Finally, there are labor laws regarding minimum wage, overtime, and workplace safety to be aware of.
Related: State guides for hiring your first employee
Step 7: Prepare to Open!
Before you can begin welcoming new members, there are several tasks to consider. These will vary by entrepreneur, but here are some common loose ends to tie up:
Obtaining business insurance: Acquire business insurance to protect the gym from potential liabilities, property damage, and other unforeseen risks. Insurance coverage may include general liability insurance, property insurance, and workers’ compensation insurance.
Setting up bookkeeping: Set up an accounting system to keep track of your income, expenses, and inventory. Tracking your taxes, financial reports, and daily transactions will give you an idea of where your business is, what needs to be changed, and if you are meeting your financial goals. An accounting software package, like Wave Accounting (FREE) or Quickbooks, will help take care of these for you.
Opening a business bank account: Opening a business bank account helps ensure clear financial records for tax purposes and simplifies the management of income and expenses.
Creating a marketing strategy: Develop a strong marketing plan to attract members. This should include a memorable logo, an engaging website, and marketing efforts like social media campaigns, local events, and special promotions to get the word out.
Industry associations: Consider memberships in organizations like the IDEA Health & Fitness Association or the National Health & Fitness Alliance. These associations offer valuable resources, networking opportunities, and professional development opportunities.
Preparing for the grand opening: Plan a grand opening event to create a buzz in the community. Make sure all your equipment is installed, staff trained, and that you have a plan to welcome and sign up new members.
Related: What types of insurance does a gym need?
Common Questions When Starting A Gym
How much does it cost to start a gym?
The cost of starting a gym can vary significantly depending on the gym’s size, the amount and type of equipment it contains, its location, and the overall type of the gym. Plan to spend between $20,000 and $50,000 for a very basic facility, and as much as $100,000 to $200,000 for a larger or more upscale fitness center.
The major expenses involved in launching a gym include:
Equipment: $10,000-$100,000 The costs of purchasing equipment like treadmills, ellipticals, and stationary bikes, along with strength training equipment like weight machines, free weights, mats, balls, bands, etc. Prices range widely based on quality, features, and capacity.
Rent deposit: $5,000-$10,000 Setting up your location will likely be one of your biggest initial expenses. The cost will depend on factors such as size, location, and condition of the property, but if leasing, you can expect to pay a deposit equivalent to one or two months’ rent upfront.
Build out & renovations: $10,000-$50,000 If you need to make any renovations or customize the space to fit your gym’s needs, there will be associated costs. These can include remodeling, installing flooring, locker rooms, showers, and adding other amenities.
Technology: $5,000-$10,000 These costs include gym management software, music/AV systems, access control systems, and wiring expenses related to hardware, software, security cameras, etc.
Insurance: $2,000-$5,000 Essential policies, like general liability, professional liability, and property coverage, protect the owners and the business. Costs depend on insurer, limits, deductibles, etc.
Marketing: $3,000-$5,000 To attract customers to your gym, you’ll need to invest in marketing. This can include creating a website, designing a logo, and promotional materials.
Miscellaneous expenses: $1,000 – $10,000 There are various other expenses to consider, such as business registration, legal fees, utility deposits, initial inventory (e.g., cleaning supplies, towels), and professional services (e.g., lawyers or accountants).
How profitable is a gym?
Gym profitability can vary greatly depending on factors like location, size, and the specific services offered. However, we can make some general assumptions based on industry statistics to estimate potential profitability.
Given that the average gym charges around $50 as a monthly membership fee, a gym owner with 500 members could generate $300,000 in total annual revenue from membership dues ($50 x 12 months) x 500 members = $300,000. Assuming this gym also generates ancillary revenue from personal training services and amenity fees averaging $100 per member per year, that’s another $50,000 annually (500 gym members x $100 per member). So, the total estimated annual revenue is $350,000.
In terms of expenses, a good rule of thumb is that between 70%-80% of revenue covers fixed operating costs like rent, payroll, insurance, utilities, equipment leasing fees, consumables, maintenance, etc. Using the midrange of 75%, those expenses would total approximately $262,500 per year.
By subtracting these $262,500 in estimated total annual expenses from the $350,000 in total estimated annual revenue, the hypothetical net operating profit for this 500-member gym would be approximately $87,500.
Profitability ultimately depends greatly on the number of clients attained versus expenses incurred. But the business model can clearly be quite lucrative at larger scale.
What skills are needed to run a gym?
There’s no requirement to have a business degree to start a fitness center, but the process will be easier and smoother if you have certain skills and experiences.
Experience working in or managing a gym: Nothing replaces the value of having been a personal trainer or worked in or managed a gym. This type of experience gives a new gym owner a unique understanding of the challenges of keeping a gym running smoothly.
Athletic and fitness industry knowledge: A background in or knowledge of the athletic and fitness industry can help a gym owner identify market needs and create a gym that meets those demands.
Employee training and management experience: Gyms require multiple staff, and an owner who knows how to train and manage employees can ensure the gym is well-staffed with quality employees. Experience in interviewing and hiring employees will also be valuable.
Customer service skills: Working with customers is a daily aspect of owning a gym. Previous customer experience can be valuable, and a gym owner who is skilled in customer service can teach employees these same methods.
Marketing skills: Any gym requires marketing. An owner who understands their target audience and who can take on or guide some of the marketing efforts can save the business money while improving the effectiveness of the marketing.
What is the NAICS code for a gym?
The NAICS code for a gym is 713940, which is classified under Fitness and Recreational Sports Centers.
The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.
Franchising a gym
If the challenge of finding the perfect location, branding and developing your gym, sourcing quality equipment at affordable prices, and coming up with a marketing plan sounds overwhelming, you may want to consider franchising a gym. National chains offer franchise opportunities that take some of the legwork out of starting a new business. There will still be plenty of challenges to overcome, and you’ll have less control over some aspects of the business, but this may be an appealing way for you to start your new business.
Resources:
Athletic Business
Club Fitness
Fitness Business Association
